Bolsonaro Will Bring Brazil Closer To The US

Brazilian President-Elect Jair Bolsonaro will likely pursue a more nationalistic foreign policy than his predecessors, driven by domestic political considerations.

The country’s ties to the US and the region’s centre-right administrations will warm, while previously close relationships with leftist governments will deteriorate.

That said, a lack of clarity over the administration’s approach to trade issues will create uncertainty surrounding its relationship with its regional trading bloc Mercosur, the US and China.

Brazilian President-Elect Jair Bolsonaro’s foreign policy decisions will likely be personalised and oriented toward domestic political goals. While foreign policy played a negligible role in the presidential campaign, over recent weeks Bolsonaro and his advisers have begun to outline their intentions, most of which are meant to appeal to his core supporters. This is because maintaining the fervent support of his conservative base is central to Bolsonaro’s governing strategy, and because it will be relatively easy for Bolsonaro to leverage the presidency’s discretion over foreign policy to score domestic ‘wins’.

To elaborate, Bolsonaro’s governing strategy appears to depend on leveraging enough vocal public support that legislators feel obliged to support his agenda, with or without the endorsement of party leaders. But Bolsonaro will likely enter office on January 1, 2019 with weak or even net negative public approval. He held a rejection rate above 40% in election polls, and a substantial portion of his vote was derived more from a rejection of the Partido dos Trabalhadores (PT) than an embrace of him. Moreover, the 30.9% of the electorate that either abstained or spoiled their ballots are unlikely to be favourable towards him. This makes it imperative to keep his base enthusiastic and energised.

A key goal will be establishing a close relationship with US President Donald Trump. While this marks a significant departure from PT-era policy, which sought to counterbalance US influence, it responds to the desires of Bolsonaro’s evangelical Christian supporters, who see Trump as a champion of evangelical interests. Bolsonaro and his sons have repeatedly expressed their affinity for Trump, and the Trump administration has offered its strong support. On November 1, Bolsonaro announced that he would recognise Jerusalem as the capital of Israel and relocate the Brazilian embassy from Tel Aviv. A key element of Trump’s foreign policy is encouraging diplomatic recognition of Jerusalem.

Aligning with the US suggests Bolsonaro will be less ambitious in his use of Brazil’s diplomatic power than his predecessors. Former President Luiz Inácio Lula da Silva (2003-2011) in particular leveraged Brazil’s rising economic power to bolster its diplomatic clout. Lula extending subsidised credit to ideological allies in the region, promoted ‘South-South’ cooperation among developing nations and attempted to serve as an intermediary in international disputes. But Brazil’s extended economic recession and its need to reduce its budget deficits have already cut into the resources available to support diplomatic initiatives, and Bolsonaro’s nationalist inclinations and disparagement of international organisations and agreements suggest he has a far less expansive view of diplomacy.

A second key goal will be taking a harder line towards Venezuela. Bolsonaro has vowed to cut ties with Caracas and suggested he would welcome a regime change, although he has disavowed speculation that he would support a military intervention. He has largely approached the Venezuelan crisis in domestic terms, using the PT’s ties to the country as a campaign attack against his defeated rival Fernando Haddad and treating the influx of Venezuelan refugees as a national security issue. Bolsonaro won the states bordering Venezuela handily in part by promising to secure the border, and his presumptive Minister of Defense, General Augusto Heleno, previously commanded the Amazonia region that covers those states. That suggests that Bolsonaro will likely boost the military’s presence along the border, primarily as an attempt to deter refugees.

Overall, Brazil will grow closer to the region’s centre-right administrations, while distancing itself from traditional leftist allies. With centre-right administrations now in power in Argentina, Chile, Colombia, Paraguay and Peru, Bolsonaro’s administration will enjoy generally warm relations with its neighbors. Bolsonaro has announced that his first foreign trip will be to Chile, breaking the PT-era tradition of visiting Argentina first, in large part because Bolsonaro’s supporters look more favourably on Chile, the region’s long-time conservative stalwart. Bolsonaro has also said he intends to break off diplomatic relations with Cuba, which has contracted more than 10,000 doctors to serve remote areas of Brazil.

However, Bolsonaro’s administration has yet to take a clear stance on its approach to trade issues, which leaves significant uncertainty over the potential for substantive shifts in its key relationships with Mercosur, the US and China. Although broadly in favour of promoting trade, Bolsonaro has expressed a preference for bilateral negotiations, and his chief economic adviser Paulo Guedes has been dismissive of Mercosur. That could undermine Mercosur’s shift toward greater trade liberalisation, in particular its renewed efforts to secure a trade agreement with the EU and to grow closer to the Pacific Alliance (see ‘Mercosur-Pacific Alliance: The Time Is Ripe To Strengthen Ties’, March 22 2017), and become a source of tension with Argentina. Bolsonaro has also occasionally criticised Chinese investment, vowing not to allow China to buy key assets like Eletrobras and to review Brazil’s participation in the BRICS group.

China's Trade Importance Steadily Rising

Brazil - Top 5 Export Destinations, % of Total Exports

Source: TradeMap, Fitch Solutions

Nonetheless, Brazil’s strong trade ties with China reduce the likelihood of a serious rupture in the Brazil-China relationship, while also creating a barrier to stronger US-Brazil ties. China is a more important trade partner and source of investment than the US, especially to the agricultural interests that are a core part of Bolsonaro’s base. Soybean farmers in particular have benefited from the rising trade tensions between the US and China (see ‘US-China-Brazil Soybean Trade: Outlook And Scenarios Amidst Trade Tensions’, October 22). While Bolsonaro’s vows to keep China and other foreign investors out of key strategic industries play to the nationalist impulses of the military elements of his support base, there is no clear constituency that stands to benefit from any attempt to impose barriers on trade with China. Moreover, Bolsonaro’s agricultural base would likely oppose attempts to further liberalise trade with the US if that were to expose them to greater competition from US agricultural goods.